Coronavirus: update on court rulings of relevance for businesses
All Federal States have issued general orders or ordinances in recent weeks in an effort to curb the spread of the coronavirus, which have included extensive rules for businesses. As our overview of key court rulings in recent weeks demonstrates, not every company agrees with these rules, and some matters are still unclear.
Minimizing the number of new coronavirus infections in order to protect our health care system from being overwhelmed is currently the top priority for policymakers. According to medical experts, achieving this "flatten the curve" effect requires minimizing social contacts, a goal which is enforced by a large number of general orders and ordinances from Germany's Federal States. These new regulations have affected not only the private lives of all citizens, but businesses as well. In addition to retailers, restaurants have been especially hard hit by business closures, but other companies are also affected, e.g. in view of their ability to hold shareholder meetings.
In the first case in our overview, the Administrative Court of Minden ruled by Order of 27 March 2020 (Case No. 7 L 246/20) that, while the order to close an ice cream parlor exceeds the bounds of the Coronavirus Ordinance in effect in the Federal State of North Rhine-Westphalia, the order is still lawful, at least upon summary review in temporary injunction proceedings. The key argument cited by the court is that, even if the business is restricted to over-the-counter sales, the spring weather could lead people to crowd in front of the ice cream parlor, which would run counter to the object of preventing new infections. It also found that ice cream creations and specialty coffees are "dispensable luxuries," so that the order does not violate the prohibition on discrimination relative to other types of restaurants.
A similar argument is used by the Administrative Court of Bavaria in an Order of 30 March 2020 (Case No. 20 CS 20.611). In this case, the owner of a retail business alleged discrimination relative to other businesses which are not engaged in retail. However, the Administrative Court of Bavaria found no discrimination because the petitioner remains free to operate its store without coming into contact with customers, e.g. by switching to online sales or delivering orders placed over the phone. It notes that the business premises may be used for internal work flows.
By Order of 27 March 2020 (Az. 14 E 1428/20), the Administrative Court of Hamburg ruled on the closure of fitness centers and athletic and recreational facilities. The petitioner, the operator of a trampoline park, was seeking a temporary injunction. It argued, among other things, that limiting the number of customers and increased measures to ensure good hygiene were sufficient to avert the dangers posed by coronavirus, so that a business closure was not necessary. The court did not share this view, pointing out that opening the trampoline park would lead to more people moving around in public, regardless of the number of customers in the park itself, and that the measures taken by the petitioner are not likely to have the same protective effect as closure.
By Order of 26 March 2020 (Case No. 5 L 744/20.F), the Administrative Court of Frankfurt refused a petitioner's request to issue an order canceling a shareholder meeting scheduled for 20 May 2020. The petitioner had argued that the shareholder meeting could not be held because of the coronavirus pandemic. But the court pointed out that the petitioner had not even furnished prima facie evidence that the company planned to maintain this date. It also noted that the federal government was considering a bill which substantially eases the rules for holding shareholder meetings, such as allowing the meeting to be held online (author's note: the bill has now been adopted).
By Order of 20 March 2020 (Case No. M 26 S 20.1222), the Administrative Court of Munich also ruled on the closure of retail businesses. The petitioner was the operator of a jewelry store who argued, among other things, that he only allows one customer into his store at a time and that he is the only one working in the store. He contended that, due to these circumstances, a crowd of people could never form and that protection from infection was ensured. The court acknowledged that the protective measures taken by the petitioner are suitable measures for preventing the uncontrolled spread of the infection among the petitioner's customers but pointed out that the police can hardly monitor compliance with these measures by way of broad-scale enforcement and that, especially for larger stores, the danger exists that crowds of people could form in front of the door. Accordingly, the court rejected the petition.
On the same date, 20 March 2020, the Administrative Court of Munich issued an Order (Case No. M 26 E 20.1209) in another matter. In that case, an operator of three stores selling footwear, apparel and gifts argued, among other things, that retailers are being treated in discriminatory fashion relative to other sectors, such as craftsmen, online vendors and mail order companies, even though the risk of infection is the same or even higher for those groups. The Administrative Court of Munich did not share this view and pointed out that it is particularly the case in retail that people typically come together in person, so that a fundamental danger exists. It noted that the recommendation to adhere to measures to ensure good hygiene may be suitable to curb the spread of the virus, but that it is hardly possible to monitor such measures. Finally, the Administrative Court of Munich found that the differentiation in the law between individual types of businesses is lawful, noting that the nature and purpose of service businesses, and by extension their risk potential with regard to a virus infection, are too varied to be dealt with by means of a general order and that the risk in connection with online sales is not comparable, as the petitioner had alleged.
In a direct appeal against a business closure, the Order of 3 April 2020 from the Administrative Court of Bremen (Case No. 5 V 604/20) demonstrates that certain aspects are still unclear for businesses in connection with large number of new regulations. In this case, a tile store appealed its closure by the authorities based on a general order. The tile store argued that it was exempted from the general order because it qualified as a "home improvement store." But the Administrative Court of Bremen rejected this argument, noting that a home improvement store differs from a specialized vendor because the breadth of its assortment contributes substantially to ensuring that the needs of the public are met. It therefore ruled that lawmakers can differentiate between home improvement and specialty stores because home improvement stores are absolutely necessary in order to enable "necessary and urgent repairs."
On the whole, it is evident from the rulings presented above that legal actions against the measures taken by the authorities have thus far had little success. When weighing the interests of the various parties, which they are required to do before ruling on a temporary injunction, the courts typically point out the overriding danger posed by the coronavirus and note that any other legal questions can be clarified in the main proceedings. But at the same time, it is also evident that the existing rules are often unclear and allow for a wide range of different interpretations, something which needs to be addressed. Particularly in borderline cases, such as the question as to whether a store qualifies as a specialty store or a home improvement store, it may be expedient to seek legal advice as well as inquiring with the competent authorities.